As Housing Market Rebounds, Listing Prices Cut the Other Way

The end of the year typically represents prime time for savvy home buyers who pounce on last-ditch discounting by sellers. But in another sign that 2013 may be brighter for housing, price reductions on for-sale homes are getting harder to find in many markets.

Bloomberg News

New research from Trulia shows that fewer homes are seeing asking-price reductions.

Out of the 100 largest metro markets, 33.6% of homes for sale saw price drops from their original or recent listing price in the last six months, according to data to be released on Wednesday by home listing and research company Trulia. In the same period a year earlier, a larger share, 36.7% of homes, went down in price. Overall, 83 of the 100 markets studied had fewer price reductions than in the previous reporting period.

In the case of homes that have been listed for more than six months, the current price was compared with the price from six months ago. Foreclosures were excluded from the data.

On the metro level, the difference was even starker. In Oakland, Calif., which recorded the smallest percentage of price reductions, only 15% of homes dropped in price. In the same period a year ago, 31% of homes experienced price cuts. “As prices strengthen and the market gets tighter, sellers are better able to sell without having to reduce prices,” said Jed Kolko, chief economist for Trulia.

The year-over-year median sales price for existing homes has risen for nine consecutive months through November, the most recent month when data were available, according to Walter Molony, a spokesman for the National Association of Realtors. Fewer asking-price reductions could mean sales prices continue to improve.

Couple that with tighter than normal inventory in markets across the country, particularly in the West, and the reasons for declining price drops become more evident. At the current pace of sales, it would take 4.8 months to sell all the homes listed for sale in November. The Realtors group considers a six-month supply of homes to be a balanced market.

While the national trend is toward fewer price reductions, some markets are faring better than others. Springfield, Mass., recorded the highest rate of price reductions, with 48% of its on-market homes cutting their prices. The percentage remains unchanged from the same period a year earlier. Five of the 10 markets with the highest share of price reductions were in New England. What markets like Springfield lack compared with healthier markets is some combination of fundamentals such as job growth, low vacancy and fewer foreclosures, Mr. Kolko said.

As for the next indicator that the housing market is on the right path, Mr. Kolko says to look to new construction. “The milestone to watch for in 2013 is whether inventory bottoms,” he said.